Question : 31) Because the CPI overstates inflation, A) when wages linked : 1228277

31) Because the CPI overstates inflation,

A) when wages are linked to the CPI, workers’ wages become too low as time passes.

B) as time passes, government payments are increasingly lower than intended.

C) as time passes, government outlays are increased by more than necessary to compensate for inflation.

D) workers do not receive adequate compensation for price changes.

E) most contracts use the GDP deflator to measure inflation.

32) Between the base period and the next period, prices stay constant. The GDP price index in the next period

A) can not be calculated without knowing how much the quantity changed.

B) will equal 0 because there is no change.

C) is equal to 100 because there is no change.

D) is equal to 1 because there is no change.

E) is equal to 50 because there is no change.

33) The GDP deflator is

A) a measure of the level of production.

B) always greater than 100.

C) the price level during the base year.

D) a measure of the price level.

E) equal to nominal GDP during the base year.

34) The GDP deflator measures

A) the price level.

B) the quantity level.

C) real GDP.

D) nominal GDP.

E) the quality of the goods and services in GDP.

35) If the GDP price index is 137, this value means that prices have increased

A) 137 percent in the last year.

B) 37 percent in the last year.

C) 37 percent since the base year.

D) 137 percent since the base year.

E) 63 percent since the base year.

36) For the purpose of measuring the cost of living for consumers, one reason the GDP price index is NOT a good substitute for the CPI is because the GDP price index

A) compares a current year basket of goods with a base year basket of goods.

B) compares current year’s prices with base year’s prices.

C) includes the prices of exported goods, which are not consumed in the United States.

D) and the CPI move in the same direction over time.

E) has a larger bias than does the CPI.

37) When comparing the annual inflation rate in the United States based on the CPI with the annual inflation rate based on the PCE price index, the data show that the two inflation rates

A) move in opposite directions.

B) remained constant over the forty year period after 1979.

C) steadily increased over the forth year period after 1979.

D) move up and down in similar but not identical ways.

E) both fluctuate but the fluctuations have little relationship to each other.

38) If we compare the last 30 years of inflation as recorded by the CPI and the PCE price index we find that the

A) two measures fluctuate together.

B) CPI inflation rate has consistently been at least 5 percentage points above the PCE price index inflation rate.

C) PCE price index inflation rate has consistently been at least 5 percentage points above the CPI inflation rate.

D) two measures give very different inflation rates for most years.

E) the CPI inflation rate was always positive but the PCE price index inflation rate was frequently negative.

39) When we compare the records of the CPI and the PCE price index over time, the

A) two are very different in magnitude.

B) PCE price index tends to exceed the CPI.

C) CPI tends to exceed the PCE price index.

D) two measures are identical.

E) CPI tends to exceed the PCE price index when inflation is high and the PCE price index tends to exceed the CPI when inflation is low.

40) When comparing the annual inflation rate in the United States based on the CPI with the annual inflation rate based on the PCE price index, the data show that the

A) CPI measure tends to exceed the PCE price index measure.

B) PCE price index measure tends to exceed the CPI measure.

C) CPI measure and the PCE price index measure are equal.

D) CPI measure and PCE price index measure move in opposite directions.

E) CPI deflator and PCE price index cannot be compared because they measure prices of different baskets of goods and services.